Real business cycle theory explains the business cycle as the result of
A) shocks to consumer spending habits.
B) excess growth of the quantity of money.
C) fluctuations in productivity.
D) unstable investment demand.

Question

Quizplus · Accepted Answer

Real business cycle theory explains that fluctuations in productivity, such as changes in technology, natural disasters, or changes in resources, result in changes in output, employment, and ultimately the business cycle. It does not rely on consumer spending habits, the quantity of money, or investment demand to explain the business cycle.

Real Business Cycle Theory Explains the Business Cycle as the Result